Anacor Pharmaceuticals (NASDAQ:ANAC) announced today its financial
results for the fourth quarter and year ended December 31, 2012.

“With the positive data from both Phase 3 trials of tavaborole for the
treatment of onychomycosis, we anticipate filing an NDA around the
middle of this year, and we will continue to evaluate commercialization
options to maximize the value of tavaborole,” said David Perry, CEO of
Anacor Pharmaceuticals. “We are looking forward to the results of the
ongoing Phase 2 dose-ranging study of AN2728 in adolescents with atopic
dermatitis later this month, and those results will help us determine
the proper concentration and dosing of AN2728 for our anticipated Phase
3 trials.”

Fourth Quarter 2012 Highlights and Recent Developments

Clinical

Tavaborole – our lead topical antifungal product candidate for the
treatment of onychomycosis, a fungal infection of the nail and nail
bed that affects approximately 35 million people in the United States.

In the first quarter of 2013, we announced the results from two
Phase 3 clinical trials in which tavaborole achieved statistically
significant and clinically meaningful results on all primary and
secondary endpoints.

AN2728 – our lead topical anti-inflammatory product candidate for the
treatment of atopic dermatitis and psoriasis. Atopic dermatitis is a
chronic rash characterized by inflammation and itching and affects an
estimated 40 million people in the seven major pharmaceutical markets,
including approximately 10% to 20% of infants and young children.

In December 2012, we announced positive results from a Phase 2
safety, pharmacokinetics and efficacy trial of AN2728 in
adolescents (ages 12 – 17) with mild-to-moderate atopic
dermatitis. This was our second Phase 2 study of AN2728 in atopic
dermatitis, and we currently have a third Phase 2 study ongoing,
with results expected later this month.

Collaborations

Eli Lilly and Company

In December 2012, Lilly selected a second development candidate
under our research and development agreement to create and develop
new therapeutics for animal health. Under the terms of the
collaboration, we received a $1.0 million payment for this
achievement and are eligible to receive additional development and
regulatory milestones as well as tiered royalties from the high
single digits to the low double digits on future sales. Lilly is
responsible for all further development of both candidates
selected and related commercialization expenses for either or both
candidates, if approved.

GlaxoSmithKline

In October 2012, GlaxoSmithKline (GSK) advised us that it had
discontinued further development of AN3365, and all rights to this
compound reverted to us. We are considering our options for
further development, if any, of this compound.

We continue to work with GSK on a tuberculosis program, which was
initiated in 2011.

Corporate

In October 2012, we completed an underwritten public offering of
4,000,000 shares of our common stock with net proceeds of
approximately $22.6 million.

In October 2012, we filed a demand for arbitration regarding a breach
of contract dispute between Valeant Pharmaceuticals International,
Inc., successor in interest to Dow Pharmaceutical Sciences, Inc. (DPS)
and us, arising out of a master services agreement entered into by
Anacor and DPS in March 2004 related to certain development services
provided by DPS in connection with our efforts to develop our topical
antifungal product candidate for the treatment of onychomycosis. We
have asserted claims for breach of contract, breach of fiduciary duty,
intentional interference with prospective business advantage and
unfair competition. We are seeking injunctive relief and damages of at
least $215.0 million. The hearing for the preliminary injunction has
been set for May 6-8, 2013. We currently expect the resolution of the
arbitration to occur in the second half of 2013.

Anticipated Milestones in the Next Twelve Months

Tavaborole, our lead product candidate for the treatment of
onychomycosis

We expect to file a NDA for tavaborole in mid-2013.

AN2728, our lead product candidate for the treatment of atopic
dermatitis

We expect data from the ongoing Phase 2 dose-ranging study in
adolescents in March 2013.

Subject to the results of our Phase 2 dose-ranging study, we
expect to finalize our development plan to prepare to initiate a
Phase 3 study in atopic dermatitis around year-end 2013.

We anticipate the resolution of our arbitration with Valeant in the
second half of 2013.

We expect to choose a path for commercialization of tavaborole in the
second half of 2013.

Selected Fourth Quarter and Full Year 2012 Financial Results

Revenues for the quarter ended December 31, 2012 were $3.3
million, compared to $2.6 million for the comparable period in 2011.
The increase in revenues was primarily due to the $1.0 million
development milestone earned in the fourth quarter of 2012 under our
collaboration with Lilly, partially offset by decreases in revenues
from our neglected diseases programs. Revenues for 2012 were $10.7
million compared to $20.3 million in 2011. Revenue from GSK was $10.8
million in 2011, which was largely associated with the September 2011
amendment to our collaboration agreement, compared to revenue from GSK
of $1.3 million in 2012, primarily for research funding. In addition,
revenue from our neglected diseases programs decreased in 2012 as
compared to 2011.

Research and development expenses for the fourth quarter of
2012 were $12.0 million compared to $13.9 million for the comparable
period in 2011. Research and development expenses for 2012 were $52.3
million compared to $56.1 million in 2011. The decrease in expenses in
the last quarter of 2012 compared to the same quarter in 2011 was
primarily due to lower clinical trial activity in our tavaborole
program and a net decrease in activities under our research and
development collaborations. The decrease in expenses for 2012 compared
to 2011 was mainly due to less extensive manufacturing efforts for
AN2728 in 2012, reduced AN2898 program activity as we concentrated our
efforts on the development of AN2728 and a net reduction in our
research and development collaboration activities. These decreases
were partially offset by the increased tavaborole activity related to
our regulatory and pre-commercialization activities as we prepare for
our 2013 NDA filing.

General and administrative expenses for the fourth quarter of
2012 were $2.8 million compared to $2.9 million for the comparable
period in 2011. General and administrative expenses for 2012 were
$11.6 million compared to $10.6 million in 2011. The increase for the
year ended 2012 as compared to the same period in 2011 resulted
primarily from increases in legal fees relating to intellectual
property and corporate development activities, increases in our
expenses for market research and other pre-commercialization
activities for tavaborole and increased salaries and related expenses
due to the hiring of additional personnel, partially offset by
decreases in our stock compensation expense.

Cash, cash equivalents and short-term investments totaled $45.5
million at December 31, 2012 compared to $50.7 million at December 31,
2011.

2013 Financial Outlook

We believe our cash, cash equivalents and short-term investments will
be sufficient to meet our anticipated operating requirements until we
file our NDA for tavaborole in onychomycosis, which we expect to occur
in mid-2013.

Conference Call and Webcast

Anacor will host a conference call at 5:00 p.m. ET / 2:00 p.m. PT today,
during which management will discuss the Company’s financial results and
recent developments. The call can be accessed by dialing (877) 291-1367
(domestic) and (914) 495-8534 (international) five minutes prior to the
start of the call. The call will also be webcast live and can be
accessed on the Events and Presentations page, under Investors, on the
Company’s website at www.anacor.com
and will be available for three months following the call.

About Anacor Pharmaceuticals

Anacor is a biopharmaceutical company focused on discovering, developing
and commercializing novel small-molecule therapeutics derived from its
boron chemistry platform. Anacor has discovered eight compounds that are
currently in development. Its two lead product candidates are topically
administered dermatologic compounds — tavaborole, an antifungal for the
treatment of onychomycosis, and AN2728, an anti-inflammatory PDE-4
inhibitor for the treatment of atopic dermatitis and psoriasis. In
addition to its two lead programs, Anacor has discovered three other
wholly-owned clinical product candidates — AN2718 and AN2898, which are
backup compounds to tavaborole and AN2728, respectively, and AN3365
(formerly referred to as GSK2251052, or GSK ‘052), an antibiotic for the
treatment of infections caused by Gram-negative bacteria, which
previously was licensed to GlaxoSmithKline LLC, or GSK. GSK has returned
all rights to the compound to us and we are considering our options for
further development, if any, of this compound. We have also discovered
three other compounds that we have out-licensed for further development
— two are licensed to Eli Lilly and Company for the treatment of animal
health indications and the third compound, AN5568, also referred to as
SCYX-7158, is licensed to Drugs for Neglected Diseases initiative, or
DNDi, for human African trypanosomiasis (HAT, or sleeping sickness). We
also have a pipeline of other internally discovered topical and systemic
boron-based compounds in development. For more information, visit http://www.anacor.com.

Forward-Looking Statements

This release contains forward-looking statements, including statements
regarding our milestones, clinical plans and financial projections. Our
actual results may differ materially from those indicated in these
forward-looking statements due to risks and uncertainties, including the
timing of filing of our NDA for tavaborole; the timing and potential
outcome of our arbitration with Valeant; the timing of data from our
Phase 2 study and the initiation of a Phase 3 study for AN2728; risks
relating to patient accrual and execution on clinical plans; the
potential for success of tavaborole and our AN2728 compound; the size of
the markets in onychomycosis, atopic dermatitis and psoriasis; the
decision and timing of any further development of AN3365; financial
projections related to our cash balance and use of cash as well as our
ability to fund operations as currently conducted beyond the planned
tavaborole NDA filing; and other matters that are described in Anacor’s
Annual Report on Form 10-K filed with the Securities and Exchange
Commission, including the risk factors set forth in that filing.
Investors are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
release and we undertake no obligation to update any forward-looking
statement in this press release.

ANACOR PHARMACEUTICALS, INC.

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

Three Months Ended

December 31,

Year Ended

December 31,

2012

2011

2012

2011

(unaudited)

Revenues:

Contract revenue

$

3,288

$

2,596

$

10,740

$ 20,306

Total revenues

3,288

2,596

10,740

20,306

Operating expenses:

Research and development (1)

11,999

13,922

52,318

56,097

General and administrative (1)

2,762

2,870

11,614

10,552

Total operating expenses

14,761

16,792

63,932

66,649

Loss from operations

(11,473

)

(14,196

)

(53,192

)

(46,343

)

Interest income

19

22

72

148

Interest expense

(1,006

)

(365

)

(2,914

)

(1,396

)

Loss on early extinguishment of debt

––

––

––

(313

)

Other expense

(16

)

(10

)

(53

)

(40

)

Net loss

$

(12,476

)

$

(14,549

)

$

(56,087

)

$ (47,944

)

Net loss per common share – basic and diluted.

$

(0.36

)

$

(0.52

)

$

(1.76

)

$ (1.71

)

Weighted-average number of common shares used in calculating net
loss per common share – basic and diluted

34,618,080

28,192,721

31,901,966

28,109,302

(1) Includes the following noncash, stock-based compensation
expenses:

Research and development expenses

$

489

$

679

$ 1,973

$

2,594

General and administrative expenses

378

509

1,629

1,810

ANACOR PHARMACEUTICALS, INC.

CONDENSED BALANCE SHEET DATA

(in thousands)

December 31,

2012

2011 (1)

Cash, cash equivalents and short-term investments

$

45,516

$

50,682

Total assets

51,071

55,789

Notes payable

25,667

17,313

Accumulated deficit

(215,211

)

(159,124

)

Total stockholders’ equity

4,811

13,899

(1)Derived from the audited financial statements
included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2011.